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The importance of purpose and business

At The Crowd event this Summer, our CEO Sacha Romanovitch shared a stage with Rick Ridgeway of Patagonia to discuss how they have implemented purpose in their businesses.

By Grant Thornton

October 05, 2016

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Purpose is becoming an increasing factor in attracting and retaining talent. Patagonia – the outdoor clothes specialist – has a mission statement that its products should not cause “unnecessary harm” to the environment.

Watch the video from The Crowd event, both leaders talked about implementing a purpose into their respective businesses.

The business of purpose: in conversation with Grant Thornton UK and Patagonia

Implementing a purpose

Sacha Romanovitch, CEO, Grant Thornton UK LLP: “What purpose does is it actually helps you fix your horizon on the slightly longer term. I think a lot of businesses in the UK operate in the realm of the here and now, and we’re really good at managing here and now to deliver profitability.

“If you’ve got a purpose about how am I going to shape a vibrant economy, you have to be thinking about the near-term future and the long-term future, as well as to what is going to be important and what matters.”

Rick Ridgeway, VP of Public Engagement, Patagonia: “There is difficulty between the first two parts of our mission statement, which is to make the best products we can, but to make them causing no unnecessary harm. No unnecessary harm is a double negative: if you take out the negatives you get that you’re causing harm, and that’s our definition of sustainability – it all causes harm.

“Our mentor in business was the founder of the modern environmental movement, David Brouwer, who famously said “there is no business to be done on a dead planet”. We really pay attention to those things and they’re all going south: deforestation, desertification, ocean acidification, freshwater neutrification, global temperatures, biodiversity.

“We really studied this problem and realised that what’s behind it is the increase of the world’s population.”

Purpose and attracting and retaining talent

SR: “We’re attracting a lot more people and clients who want to work with businesses who care about this what they do, where they work, the impact they have on the world. We’re getting more people who are choosing to work with a company of a certain sort versus people who want to come to an organisation that’s known for good training to be chartered accountant. That alignment of why you want to work somewhere really matters.”

RR: “Yvon’s (Chouinard, Patagonia’s founder) memoir is called Let My People Go Surfing. It’s a bizarre title and you don’t know what it means until you get the book and find out.

“You can only go surfing when the waves have a swell coming from the right direction, when the tide is just right and when the wind is blowing from the right direction. You can’t predict that – it just kind of lines up and when it does, you’ve got to go surfing.

“You can do that at Patagonia. The only thing you have to do is never let your co-workers down, so it is totally self-policing. Having that flexibility as part of our business model has really served us well.”

Overcoming the ethical dilemma of purpose

SR: “The tax side has become increasingly easy for us. If there are clients who are coming to us and their goal is to pay no tax, we don’t work with them. We have walked away from a number who’ve wanted to work with us on that premise.

“Tax products and schemes have never really been something we’ve done a lot of and now it’s actually ‘well, isn’t it good that we didn’t do a lot of that’.

“I think we see very clearly that for a business to be strong and sustainable it needs to be paying an appropriate amount of tax. Equally, if a business is paying too much under the regime then it’s not going to be competitive globally and that’s unhelpful.”

RR: “One story in our own history which we frequently tell is the learning we did beginning in the late 80s, and going in the early 90s, of what the true impacts of traditionally grown cotton are on the environment.

“As we started to dig deeper into it and realise what the impacts are of the insecticides and pesticides used in traditionally grown cotton, we started to realise that we were in the business of doing harm when the mission was to do no unnecessary harm.

“So if that’s your mission what do you do about it? Well, we began to explore organically grown cotton, then we implemented an increasing percentage of organically grown cotton into our cotton fibre products.

“But as we learnt more about it we got to the point where we said ‘that’s not good enough’. If we are really going to cause no unnecessary harm, we have to commit to using only 100 per cent organically grown cotton in our products.

“That was in the mid-90s and organically grown cotton was just in an early stage of development. A quick survey revealed that if we made that conversion there wouldn’t be enough cotton in the supply chain to meet our own needs.

“So, what do you do? Well, we said we’re not going to be in the business of doing evil, so we bit the bullet and made that commitment, and sure enough in the first year sales really took a hit.

“We had to go out to train farmers how to grow cotton. We had to learn how to farm organically, and it took two or three years until finally we recovered and every year after that we’ve been more profitable.”

So what did we take from the conversation? It seems three things: there is no business to be done on a dead planet, business thrives when society is thriving; people increasingly see this and want to work with businesses that have a core purpose to their activities; and finally a purpose is about much more than words – it is about using it to make clear business choices that may short term dent profitability and yet longer term create a more resilient and sustainable business.

With the world’s population set to increase by an estimated 7bn by 2050 it seems that for all businesses to think about how they can contribute to a vibrant, sustainable society is going to be pretty important if we are to pass on a strong legacy to our children.